BA flies into trade war with America

THE European Commission is heading for a damaging trade war with America over its subsidies to US airlines that have gone bankrupt or are at risk of going bust.

European carriers, led by British Airways, claim that US ailrines are slashing fares for transatlantic flights while being subsidised by the US government to the tune of billions of dollars.

BA's new chairman, Martin Broughton, told analysts last week: 'Some airlines have gone out of business, but there remain the walking dead, being propped up by governments and, in the US, by Chapter 11.'

Under US bankruptcy procedures a company going into Chapter 11 can carry on trading for cash. Its financial obligations are put aside - including paying into the pension funds of its employees.

The EC has listened to the complaints of airlines and has now belatedly started to threaten action against the American carriers - if it can be proved they are offering fares below cost.

An EC spokesman said: 'We are aware of the problem of US subsidies to American airlines and the issue of some of their carriers cutting fares while effectively bankrupt. You can be assured that we are doing our best.'

The EC has passed a rule that would effectively force US airlines to raise the price of their tickets sold in Europe if it was proved that US airlines were slashing fares below cost.

But last night BA said that the rule would be so difficult to prove and enforce that it was in effect useless